Negotiations over raising the debt limit continue between the White House and congressional leadership while lawmakers are struggling to find a compromise on the overall budget. On June 8, Alice Rivlin, founding director of the Congressional Budget Office, answered questions in a live web chat on the nation’s debt and fiscal health.
The transcript of this chat follows.
12:30 David Mark: Hi folks, welcome to the chat.
12:31 Comment From Marie C.: Does it even make sense to have a debt ceiling? What does it really mean?
12:33 Alice Rivlin: It actually doesn’t make much sense to have a debt ceiling. If we were running our fiscal affairs more responsibly, we wouldn’t need one. However, we have it and right now it may be a useful tool to force the decisions on the longer run debt that need to be made.
12:34 Comment From Troy Gerr: You’ve stated in the past that the debt ceiling will have to be raised, even though lawmakers don’t necessarily support doing so. What provisions will need to be attached to a debt ceiling bill in order for it to pass?
12:37 Alice Rivlin: Unclear right now–the answer is a work in progress. My guess is that the Biden group will be able to agree on some spending cuts (mostly discretionary spending) that have bipartisan support and a process change that will force the parties to come to grips with the longer-run savings (entitlements and revenues) later.
12:37 Comment From Gary: There’s been grumbling about a lack of a plan by Senate Democrats. Why have they not proposed anything, and do you think they will?
12:39 Alice Rivlin: Senator Conrad was hoping to have a bipartisan plan coming out of the Senate Budget Committee that everyone could get behind (something like the Bowles-Simpson plan), but was not able to get agreement. Not clear what happens next. Action has moved to Biden group.
12:40 Comment From Marcus: You’ve been around the Washington budget process for a long time. Is this the worst you’ve ever seen it? Have there been other comparable crises?
12:42 Alice Rivlin: Yes, this is the worst ever for two reasons. The problem is much bigger. The looming future debt threatens our economic prosperity in much more serious way than ever before. At the same time the parties are more polarized than ever in my experience.
12:43 Comment From Marty R: Why is it that the debt limit was raised six or eight times under George Bush, and nobody squawked, and all of the sudden it’s this huge political albatross?
12:45 Alice Rivlin: In the Bush years the Republicans were in control of Congress as well as the White House and weren’t concerned about the debt. Now we have divided government, a much bigger debt, and the baby boomers are already retiring.
12:45 Comment From Julie S.: What do you see as the long-run prospects, and timeline, for fundamental changes to Medicare, such as through vouchers or premium support?
12:49 Alice Rivlin: We need to put in place a plan to slow the rate of growth of Medicare (and Medicaid) soon, although it will be hard to do and must phase in slowly. I favor shifting to premium support while preserving traditional Medicare as an option. There are other approaches, including the one proposed by the President. But we have to do something soon. The status quo is not sustainable.
12:49 Comment From Paul Hughes-Cromwick: What is the ideal way to grow payments under a Medicare premium support model?
12:51 Alice Rivlin: There may be no “ideal” way, but capping the growth of the subsidy at less than the current rate is a start. I have suggested GDP growth plus one percent. Over time that might prove to high or too low andcould be changed.
12:51 Comment From Sally: Is the fight over the debt even more difficult this go around than in previous years because of the hyper-partisanship the country is facing?
12:53 Alice Rivlin: Absolutely! Controlling the growth of debt requires bipartisan agreement, and politicians aren’t thinking that way these days.
12:53 Comment From Tyler Durden: What will happen to “disinvested” G-And CSRD Fund retirement capital (which will be about $235 billion by August 2) if there is no debt ceiling resolution. Is this accrued retirement funding that will be written off?
12:54 Alice Rivlin: We will have a debt ceiling increase–I don’t believe we will default–and then these cash management gimmicks will all be reversed.
12:55 Comment From Joe S: How do you respond to critics who argue that more needs to be done to address unemployment and that the US needs to wait to address the deficit until strong economic recovery is underway?
12:57 Alice Rivlin: I agree that jobs should be high priority and we should structure the deficit reduction so that it does not slow the near-term recovery. BUT over time the biggest threat to jobs and incomes is the growing debt. Failure to deal with that could tank the economy for a long time.
12:57 Comment From Ed Zimmer: The economic assumptions of administrations have been woefully off the mark, CBO projections for the next three years assume a 50% increase in revenues while holding spending steady which will not occur. Mandatory spending is just shy of total revenues so why isn’t the administration admitting we are broke?
12:58 Alice Rivlin: We aren’t “broke,” but our debt is rising much too fast. We have to fix that. Nobody disagrees with that.
12:59 David Mark: Thanks for the chat, everybody.
12:59 Alice Rivlin: Thanks! I enjoyed it.